SRI LANKA FINDS OIL OFF COASTSri Lanka, the island nation anchored off India’s southeastern coast, has announced a potentially significant discovery of oil reserves in the Palk Strait, the narrow waterway that separates the two South Asian countries. Sri Lanka has never been a major energy producer but in the aftermath of its war against the Tamil Tigers, which ended in 2009, the government in Colombo has revived efforts to exploit oil and gas resources off the country’s coast. Last year, natural gas was discovered in two out of three wells sunk in the Mannar Basin while 15 blocks are now being considered for serious reserves of petroleum. Five of those blocks sit in the Cauvery Basin, where India has successfully extracted oil over the past several decades. Analysts suspect the finds will draw interest from many countries, including China, which has strengthened ties to Sri Lanka in recent years. Chinese involvement in energy exploration just miles off India’s coast would likely spark concerns in New Delhi. Indian companies are already in talks with the Sri Lankan government to prospect in the potentially energy-rich waters. (BBC March 12, 2012) CHANGE OF LEADERSHIP AT THE ISIA leadership change is underway at the world’s most notorious intelligence service. Lt. Gen. Ahmed Shuja Pasha, who has served as Director General of Pakistan’s Inter-services Intelligence Agency (ISI) since October 2008, will step down March 18. Pasha was reportedly lobbied by the current Army Chief, Gen. Ashfaq Kayani, to accept a one year extension, but ultimately refused. (ISI chiefs are nominally appointed by the Prime Minister but the decision is ultimately made by the all-powerful army chief.) The ISI came under unprecedented criticism during Pasha’s tenure, charged with conspiring with Islamist militant groups and involvement in extra-judicial kidnappings and killings domestically. U.S.-Pakistan intelligence cooperation reached an all-time low in recent years, strained by fundamental rifts with the United States over the killing of Osama bin Laden by U.S. Special Forces and Pakistan’s refusal to launch an offensive on militant hideouts along the Afghan-Pakistan border.

Pasha will be succeeded by Lt. Gen. Zahir ul Islam, who was once deputy director general of the ISI and now serves as Corps Commander Karachi. He will become, by many estimates, the second most powerful man in the country. Wajahat Khan, a Pakistani journalist focusing on military affairs, described Gen. Islam as a “safe choice.” “He’s served in the ISI, he’s from an infantry wing, and he’s pretty media savvy – which is what they need right now.” (The Nation March 10, 2012; New York Times March 9, 2012)PROGRESS ON THE IRAN-PAKISTAN PIPELINEPakistan is negotiating a broad trade package with Iran which includes provisions to complete the Iran-Pakistan natural gas pipeline, a move likely to violate U.S. sanction on Iran over its nuclear program. Pakistan is now seeking a waiver from the United Nations Security Council to proceed with the multi-billion dollar Iran-Pakistan gas pipeline, which once included India before pricing disputes forced New Delhi to drop out. Under a 2009 accord reached between Islamabad and Tehran, Pakistan has until 2014 to lay pipeline up to its border with Iran or it will be forced to pay millions of dollars in penalties to Iran, which has reportedly nearly completed its own section of the pipeline. A source told Pakistan Today that Islamabad “has not even laid a single inch of over 700km-long pipeline.” Meanwhile, Iran has reportedly offered Pakistan $250 million to complete its section of the pipeline and is considering Pakistani proposals to extend the 2014 deadline. Iran is also offering to pay for Pakistani food exports with discounted electricity and petroleum products and is mulling a new currency swap arrangement proposed by Pakistan last July. (McClatchy March 12, 2012; Tehran Times March 12, 2012)INDIA, IRAN LOOKING TO REVIVE NORTH-SOUTH CORRIDERIndia is involved in its own negotiations with Iran to revive the long defunct International North-South corridor which was first agreed by India, Russia, and China in 2000. The project envisions a multi-modal transportation corridor through Iran, Azerbaijan, Kazakhstan, and Russia, connecting Europe to South and Central Asia. Ports on India’s west coast would ship to the Iranian ports of Bandar Abbas and Chabahar. The project has long been stalled by a lack of commitment from Iran, but in January fourteen stakeholder countries reinforced their support for the project and representatives from all the countries are scheduled to meet in New Delhi on March 29. Experts believe interest in the project has been revived by chronic instability in Pakistan; China’s own efforts at building alternate infrastructure routes through Central Asia; and Iran’s increasing economic isolation from Western sanctions targeting its nuclear program. (The Economic Times March 13, 2012)